Air India's debt restructuring has hit a hurdle as banks say they want seats on the airline’s board after they agreed to convert 40 per cent of its short-term debt, or around Rs 7,000 crore, into equity. “The consortium restructuring the debt has raised concerns over not getting any representation in the board even after converting a substantial part of the debt into equity,” said a senior Civil Aviation Ministry official, who did not want to be identified. “They have raised this issue with the Reserve Bank of India (RBI) after the
Finance Ministry denied them any board-level representation.” Air India (AI) is the second Indian carrier to get a large bailout this year. In early 2011, 15 banks restructured an approximately Rs 7,000 crore debt for Vijay Mallya-promoted Kingfisher Airlines. In the Air India debt recast, most of the 26 banks are state-owned, according to a report by Business Standard. They include State Bank of India, the biggest lender to the airline. Other names include Punjab National Bank and Bank of India. The official said the Finance Ministry said the consortium will not get any representation on the board even after converting debt into equity. “The banks feel without any representation on the board of the airline, they will not be able to ensure protection of their interest,” the official added. According to the restructuring plan approved by RBI, the banks will restructure around Rs 18,000 crore of the approximately Rs 24,000 crore short-term debt on Air India’s books. Of this amount, banks will convert around Rs 11,000 crore to long-term debt with a repayment of 10 to 15 years. They will convert the remainder, around Rs 7,000 crore, into Compulsorily Convertible Preference Shares. AI has Rs 43,000 crore of debt on its books — Rs 20,000 crore aircraft loans, and Rs 24,000 crore working capital loans or short-term debt. The aircraft loans have a long repayment period, and are less of a cause of worry.
Click here to see the original article>Finance Ministry denied them any board-level representation.” Air India (AI) is the second Indian carrier to get a large bailout this year. In early 2011, 15 banks restructured an approximately Rs 7,000 crore debt for Vijay Mallya-promoted Kingfisher Airlines. In the Air India debt recast, most of the 26 banks are state-owned, according to a report by Business Standard. They include State Bank of India, the biggest lender to the airline. Other names include Punjab National Bank and Bank of India. The official said the Finance Ministry said the consortium will not get any representation on the board even after converting debt into equity. “The banks feel without any representation on the board of the airline, they will not be able to ensure protection of their interest,” the official added. According to the restructuring plan approved by RBI, the banks will restructure around Rs 18,000 crore of the approximately Rs 24,000 crore short-term debt on Air India’s books. Of this amount, banks will convert around Rs 11,000 crore to long-term debt with a repayment of 10 to 15 years. They will convert the remainder, around Rs 7,000 crore, into Compulsorily Convertible Preference Shares. AI has Rs 43,000 crore of debt on its books — Rs 20,000 crore aircraft loans, and Rs 24,000 crore working capital loans or short-term debt. The aircraft loans have a long repayment period, and are less of a cause of worry.